The Superrich Are the First to Sell When Markets go South

When the stock market gets rocky, who’s first to sell? According to a new study, it’s the superrich, and that just makes the volatility worse.

Researchers from the University of Michigan and Ohio State University analyzed data from 273 million tax returns filed during the Financial Crisis to better understand which groups react more strongly to market volatility, and why.

They found that immediately following the bankruptcy of Leman Brothers, when nearly $10 trillion was wiped from the markets, the first group to drop stocks was the top 0.1% of earners.

And those sales were “relatively more associated with stock market tumult as measured by the VIX,” which is a measure of expected volatility in the S&P 500 over the coming 30 days.

With further research, the data could help authorities better manage crises in the future, Daniel Reck, a doctoral candidate at the University of Michigan and an author of the report, told Fortune. “It’s difficult to say exactly how responsible high-income people are responsible relative to everyone else, but they’re certainly contributing more to volatility,” he told Bloomberg.

Though it’s still hard to determine why exactly the wealthy were the first to jump ship, Reck suggests it’s possible the rich have more assets in the market—meaning a small dip can translate to a large loss. With more to lose, they’d be more quick to react. Meanwhile, investors who have a stock with accumulated loss are more likely to hold onto it.

“One key piece of the puzzle, not addressed by the current research paper, is whether those who sold in the wake of the Lehman collapse were able to time the market successfully,” Reck told Fortune. “That is, did they lose money by panicking, or did they make money by figuring out that everyone else was panicking?”

Stocks plunge early on global sell-off, Dow down over 200 points

A global market sell-off sent U.S. stocks plunging on Thursday morning, as investors worried about flagging oil prices and uncertainty around impending interest rate hike as well as concerns overseas with China’s struggling economy.

The Dow Jones Industrial Average exhibited a decent amount of volatility early Thursday, dropping more than 200 points shortly after the markets opened and then briefly rallying before plunging once again. The blue chip index is currently down roughly 23o points, or 1.3%, on the day. The Dow is on pace to record its worst trading day in more than a month — it lost 261 points on July 8 — and the index has dropped about 560 points, or 3.2%, since the start of August.

The tech-heavy Nasdaq composite has lost nearly 90 points on the day, or 1.8%, while the S&P 500 is down 25 points, or 1.2%. The Nasdaq is down 3.8% since the start of the month, while the S&P 500 is down 2.3% in that time.

The Chicago Board Options Exchange Volatility Index (VIX), a measure of market volatility that is often referred to as the “fear index,” is up nearly 13% on the day.

This morning’s market in the U.S. turbulence follows a day of big losses abroad, where Germany’s DAX fell 2.2% and the Shanghai composite in China dropped more than 3%. Global losses reflected concern over falling oil prices, which are close to dropping below $40 per barrel as global oil supplies continue to outpace demand, as well as ongoing uncertainty over the timing of the U.S. Federal Reserve’s long-awaited interest rate hike. The release of minutes from the Fed’s July meeting showed the central bank’s leaders do not yet feel that U.S. economic conditions have reached the necessary point for the first interest rate increase in nearly a decade, though many economists still feel the rate hike will occur as soon as next month.

The Dow Jones Industrial Average closed the day down 350 points, or 2%. The S&P 500 dropped 2.1%, ending the day at 2,058 points. Meanwhile, the tech-heavy Nasdaq composite was hit hardest, falling 122 points (or 2.4%) to end the day under the 5,000-point mark for the first time since early-May.

It was the worst day of the year for U.S. stocks.

Earlier, volatility struck markets around the world, as global markets felt the impact of the uncertainty in Greece, where banks are closed and ATM withdrawal limits have been imposed. The Chicago Board Options Exchange Volatility Index (VIX) — also referred to as the “fear index” — soared on Monday, rising by nearly 5 points, or 35%, to reach its highest levels in about four months.

Greek citizens will vote this weekend on a new bailout proposal that could bring billions of dollars in additional aid into the troubled country while installing strict austerity measures. A “no” vote on the bailout extension, meanwhile, would likely pave the way for Greece’s withdrawal from the euro zone.

Also, on Monday, ratings agency Standard & Poor’s once again downgraded Greece’s credit rating — to CCC- — in an assessment that predicted a Greek default within six months.

A day when stocks didn’t nose dive

U.S. markets tried something different on Thursday: They didn’t finish the day in free fall.

The Dow Jones Industrial Average dropped for the sixth straight trading session, but only by around 25 points, or 0.2%. Meanwhile, both the Nasdaq composite and S&P 500 ended slightly higher than they started as a fresh batch of positive news about the U.S. economy averted yet another massive sell-off.

It wasn’t quite the rebound that many investors had been hoping for following huge declines over the past few weeks in which the markets shed . But it made for a bit of breather.

Still, it was another quite volatile day for U.S. stocks as the Dow Jones was down by more than 200 points early in trading before managing to stabilize by the end of the day. The blue-chip index, which closed at 16,117, is currently on its worst losing streak since August of last year and it is now down about 2.8% on the year.

Thursday’s moderate losses for the Dow came just a day after the index experienced several wild swings over the course of a few hours that at one point put it down by about 460 points. The Dow finished Wednesday down by 173 points, or 1.1%, after a late-day rebound, while the Nasdaq and S&P 500 finished that day down by 0.3% and 0.8%, respectively.

U.S. markets ultimately fared better on Thursday thanks, in part, to the Labor Department’s report that initial jobless claims declined by 23,000 last week to reach their lowest point since April 2000. The Federal Reserve also released numbers showing that industrial production increased by 1% in September, its biggest jump in more than four years. Investors were likely also encouraged by a St. Louis Fed officials comments in favor of the Fed keeping interest rates low.

However, even that rash of positive news could not completely outweigh the ongoing concerns that have been weighing down the market in recent weeks, including fear of slowing global economic growth, especially in Europe, along with escalating fears over the worldwide Ebola epidemic. Wednesday’s decline was also inspired, in part, by disappointing U.S. retail data for the month of September.

All three indices have seen an especially volatile few weeks recently as the losses have stacked up to leave the Dow Jones down by almost 6% in the past month alone, while the S&P 500 and Nasdaq have actually fared even worse, dropping by 6.8% and 7.4%, respectively. In that same amount of time, the Chicago Board Options Exchange Volatility Index (VIX), which is referred to as the “fear index,” has almost doubled to more than 25 points.

Stocks make strong showing in first half of the year

U.S. stock markets continued their steady rise during the first half of 2014 with all major indexes showing gains.

The S&P 500 was up 6%, while the Dow Jones Industrial Average advanced by 1.5% and Nasdaq climbed 5.5%, respectively. All three indexes also showed gains in the second quarter, marking the sixth-straight quarterly gain for both the S&P 500 and the Nasdaq.

The markets weathered a tumultuous start to 2014 from a sharp drop in U.S. gross domestic product in the first quarter, political turmoil in Ukraine and a harsh winter that siphoned retailers’ profits. Low interest rates in the U.S., Japan and Europe helped to offset much of the uncertainty and kept the economic recovery going, both domestic and abroad.

The indices have risen steadily, posting several record highs, with the Dow Jones experiencing 11 record closes so far in 2014 and the S&P 500 notching 22 record closes already this year. What’s more, the S&P 500 has been riding a relatively stable upward trajectory, having gone 51-straight days without closing up or down by more than 1% – a streak of consistency the index hasn’t seen in nearly two decades. The index is currently up by 0.13% Monday afternoon.

The markets could also see a boost from positive numbers released Monday from the housing sector. The National Association of Realtors said Monday that the pending home sales index jumped by 6.1% in May, indicating improved momentum in the housing market and increased consumer confidence.

Airlines are one industry that soared in the first half of the year, with gains of more than 40% on the S&P 500 resulting from efforts to cut costs as well as increased revenues from non-ticket items like baggage fees, according to MarketWatch.

The relative steadiness of the markets has been reflected by the CBOE Volatility Index (VIX), which predicts stock movement. It is set to end the first half of the year at just under 11.5, falling far short of its long-term average of about 20. Federal Reserve Chair Janet Yellen and others have expressed public concern over the effect of decreased volatility in the markets, a condition they worry could result in investors taking on too many risks. However, Fortune’s Stephen Gandel noted Monday that the VIX may not be picking up on what could be perceived as nervousness on Wall Street, as many of the other sectors that performed well in early 2014 – like utilities, energy, and real estate – are stocks investors tend to but when they are looking for safe bets.

Fortune also reported earlier this month that Yellen dampened expectations for the economy when the Fed recently reduced its GDP growth estimates for 2014 by more than half of a percentage point. Meanwhile, new economic data for June is scheduled to be released Thursday, ahead of the holiday weekend, which could affect the markets.

Other upcoming market catalysts include Chinese tech giant Alibaba’s expected IPO, which will likely be one of the largest tech debuts ever. The legal troubles of European banks Barclays and BNP Paribas could also have an impact on the markets, while ongoing strife resulting from the Iraqi insurgence has increased the volatility of oil prices worldwide. (Crude prices have actually begun to recede this week after soaring when violence exploded in Iraq earlier this month.)